Will Future Hackers Be Short-Sellers?

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(This originally appeared on Rich Tehrani’s Communications & Technology Blog)

 

If you are publicly traded in a country where shorting is allowed – you are a bigger target.

One can’t help but wonder if the opportunity currently exists for hackers to find loopholes in the security of publicly traded companies only to short the stock and then exploit the loophole and do tremendous damage to the company in question. You can’t help but come to such a conclusion when you read about how investors are weighing at least in part – the data breach when sending Sony’s shares lower.

In May, a CNBC headline read: Sony CEO Apologizes for Internet Breaches; Shares Fall and today the Wall Street Journal had a piece titled Sony Investors Skeptical, Sending Shares Down which does make the connection between the breach and the below average share price performance compared to other Japanese companies.

Hacking has gone from something which was done for kicks to a serious enterprise where you can make money from selling credit card numbers and other account information. Now however, it is becoming apparent share prices can be affected by breaches meaning there is yet an entirely new reason to hack into systems.

The Security Ninja blog has some basic research on the correlation between stock performance and security breaches and what it seems to find is, shares do indeed get hit when there is a breach but over time they recover and potentially go up quickly. In other words – if this relationship holds and other factors stay constant it may be possible to short, breach and then buy to cover and buy to hold. Of course a hacker could play options as well.

The bottom line is if you are a private company, you are a target – if you are publicly traded in a country where shorting is allowed – you a bigger target and hopefully the agencies regulating trading are working closely with other arms of law enforcement to bring people to justice quickly if they engage in breaches in-part to benefit from a predicable move in stock price.


Rich Tehrani is CEO of TMC. In addition, he is the Chairman of the world’s best-attended communications conference, INTERNET TELEPHONY Conference & EXPO (ITEXPO). He is also the author of his own communications and technology blog.

Edited by Stefania Viscusi
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CEO, Technology Marketing Corporation

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